Absurdity of Texas Wine Shipping Law Reaches New Heights

• I guess this is just part of the TABC full employment act.

• Judging from your responses, you want anything BUT the free market to operate.  Thanks for telling us what we can and cannot buy and forcing us to pay more for it just so you can get your "share".  If the laws for distributing and selling alcohol in Texas are so great, why isn't every other good sold in Texas that way?

• Yes, the internets can often sound different than when folks are in front of each other “a voce”. My lengthy comments were an attempt to give you a glimpse into the workings of our trade. Sorry that they were so long. But the wine and spirits business can’t be summed up in less than 140 characters. Also meant to dispel misconceptions of this “monopoly” you talk about. They are law, and you have the right to work to change them. I am not concerned if I change your mind. But it doesn't change the facts on the ground. As you know, every good journalist knows when to distinguish conjecture from fact. In the end I’m not trying to change your mind, just offering my point of view. We all have the right to our opinions. As for myself, your very first comment above, to me, epitomized the textbook definition of a complaint (i.e. an expression of discontent, regret, pain, censure, resentment, or grief; lament; faultfinding). Happy Holidays…

• It was just the overall sarcastic tone and length of both of your comments, and the "Have at it" bit, AC. It didn't feel like a discussion, it felt like a lecture. Maybe one day we can meet and discuss as you say, and it will sound different than it sounds in writing, but until then, thank you for your comments. They didn't change my mind, but your points are noted.

• <i>"I should be able to buy the wines I love when they are available elsewhere, but not in Texas, and when I buy the same bottle of wine in Texas that I can get in New Jersey or Florida, I should not have to pay a 50% markup." </i> Not sure I would characterize the above quote as "facilitating".   If you lived in New Jersey, or Florida, you'd be paying a lot more to live there. So you save $5 on a bottle of wine, occasionally, but spend more on rent, transportation, state income taxes and a much higher cost of living. And yes, one of the purposes of a blog is to engage in a discourse. And not everyone will agree with each other.   But I’m not sure how you take away disdain from this discussion, when there is a good deal of information that has been thoughtfully shared in order to give you (or anyone who cares to read it) a greater perspective of the process and the industry.   I misunderstood. I thought you might be interested in an account of the workings of the trade. It sounds like you have taken offense. For that I am sorry you took it that way.

• <i>"I don't see how just complaining will make it any better. But if it makes you feel better, hey it's a "free" country. Have at it."</i> And here I thought I was just facilitating discourse, and voicing a valid consumer viewpoint, which is the purpose of a blog after all. I'm sorry you don't agree with me, but me voicing my opinion (which in this case happens to be in agreement with the writer) should not be disdained as a complaint.

• Mai, with all due respect, there is plenty of product moving. And scores of retailers and restaurants buying the product and paying the taxes on them (so folks like you and I don't have to pay state income taxes, like most states). But there is always about 5-10% of product that doesn’t sell. Have you ever dumpster dived in the back of a supermarket?   Direct shipping? As far as Jeremy Parzen reports, he seems to be getting what he wants. But there is a logistical problem with that. Let’s just envision a scenario in which all wine is shipped directly: Imagine a city like Houston. It’s Dec. 3, and there are 64,000 cases of wine, beer and spirits waiting to be delivered that morning by one of the large distributors. But wait, with all the distributors in play, large and small, triple that number to 192,000 cases – not at all an unusual number for that city at that time of year. Now imagine FedEx, UPS, DHL and the USPS (especially in these times, when the post office is cutting services) delivering all those boxes, along with everything else they deliver. Keep in mind that anything going to a hotel or restaurant will need to be delivered at a specific time. And if any of those cases are going to a supermarket, they’ll be expected to arrive before 6 a.m. If beer and quality wine are on the trucks, the trucks will need to be temperature-controlled. More important in Houston are refrigerated trucks from May to October, but in some parts of the country, they’ll need to be heated. Do you think FedEx, UPS, DHL or the USPS is going to buy those trucks? Who’s going to pay for them? Now imagine that scenario all through the month of December, when other packages, mail, etc., are being delivered. And imagine that happening in Dallas, Denver, Los Angeles, San Francisco, Chicago, Atlanta, Boston and all the other large cities in the US. Then imagine New York City, where you can multiply those 192,000 cases by a factor of 5. And that’s for just one day. And then there is the obvious environmental issue. I have a writer friend who gets samples sent from producers on a regular basis. Sometimes it is a single bottle, sometimes a two-pack, three-pack even a six-pack or 12-pack. In each case, there is packaging. About half the time, it’s polystyrene foam that she can’t recycle. Now imagine tens of thousands of people getting their wine shipped to their houses. At a time when industries are trying to figure out ways to cut packaging and to create smaller carbon footprints, the packaging plus the fuel cost of shipping individual or small packages of bottles becomes staggering. I know some people will say that we already get a lot of products delivered to our doorsteps this way. But a bottle of wine isn’t like a mattress or a painting that gets shipped once. It’s a consumable product that is replenished regularly. The current wholesale distribution system offers vast economies of scale with transport both to central (and temperature-controlled) distribution centers and to retail stores. A consumer can drive to a central location – a retail store – that has lots of options. And if she special-orders a wine that is at the warehouse, it’s delivered with a load of other wines, not as a single bottle, specially wrapped, in a single truck. There is also the “local” perspective When you read about a wine and want to get a bottle, you have several options. You can buy it at a neighborhood supermarket or wine store (which, in our culture of immediate gratification, is what most wine drinkers want to do). You can order it online (at this point in some states, not all) or you can order direct from the winery (also in some states, not all). But from a local perspective, if you buy online, the money leaves your community whereas if you buy from a store (say from one of your advertisers, Specs, etc), a lot of the moneys stay in your community to pay things like salaries and wages of store workers, delivery people, local distributors and their employees. And local advertising, like in your magazine. Any taxes accrued will be local taxes, benefiting your local state or community. The bottle of wine you buy is one of 12 in a case that were transported together to the store, saving on transit costs by making shipment more efficient. If you buy from a local wine store, you’ll have the opportunity to develop a relationship with your merchant who can learn your likes and dislikes. This can also happen online with some software. It would not be a face-to-face kind of relationship. If you want more of the wine, again, it’s a short drive from your house. And if the wine is flawed, it’s easy for you to return it and get a replacement bottle. You won’t have to hassle with repackaging sending it – after it’s been uncorked. The wholesaler, importer and producer will take care of that. There are more choices now than ever. 20 years ago there were about 20% of the SKU's that there are now. Along with that, there are many wines that have been in Texas that have dropped out (economy, winery didn’t get paid by wholesaler, lack of demand, etc). And it has been re-iterated that anything that anyone wants, in the state of Texas, the distributors are more than happy to bring in. Working inside the laws we are bound by. Not the laws I made. That said, if a wine is brought in and does not have a viable life, those wines will go away. It is the way free market economies work. You are welcome to jump in and try to change the system. I don't see how just complaining will make it any better. But if it makes you feel better, hey it's a "free" country. Have at it. I see and know the argument from both sides. And while I am not entirely opposed to the position you hold, I know there are reasons for the current configuration in the marketplace. It is not a grand conspiracy set in motion by the distributors. You’re welcome to think it is, but it is inaccurate.   Maybe some day we can have a real conversation, in person, to go deeper in depth. Our mutual friend and colleague, Dr. Parzen should join us.

• AC, with all due respect, your entire premise comes from the standpoint of a distributor who can't move product. You do not once address the fact that most states do not prohibit the shipping of wines from out-of-state direct to consumer, while Texas passed some law that makes it impossible to acquire wines from out-of-state.   So the question still stands: why not let out-of-state sellers ship directly to consumers in Texas?  If the system is dictated by what "works," as you say, then let it take care of itself. Let out-of-state sellers ship directly to consumer. Plenty of other states do. And if people want to purchase from players in-state they will do so, right? And if that's what happens, then the out-of-staters won't be able to compete and will go away (using your line of argument).  However, when you "keep it in the family" by keeping it all in Texas -- and you do this by passing a State law that somehow prohibits sales from out-of-state -- I'm sorry, but this to me means monopoly.

• Alfonso, great points and great insights... and perhaps the expression "greedy distributors" was excessive (although, I will note that it was followed by "fair enough"). It's always great to see you here and it's great to read your insights — culled and gleaned from 30 years in the business.  Thanks...  And btw, wasn't that Castell'in Villa yummy last night? ;) 

• It just feels "un-American" to me... that I can order olive oil from Sonoma but I can't order Giacomo Conterno... Your point is so right on, Jon: in our famously and doggedly Republican state, the government wants to dictate what wines I can and cannot drink... in my own home! I love Texas but this fact makes me feel like the government has its hand up... well, you know where... 

• Drew, thanks for posting here. I do think we're talking about apples and oranges: I'm writing from the point of view of the consumer, not the restaurateur/wine director. And the bottom line is that it doesn't really matter: I can always find an out-of-state retailer who's willing to ship me whatever I want. It happens every single day... Great to see you here, man, and it's great that we're forming an online community of wine lovers and professionals here in Texas. 

• Great to see the TABC here! Carolyn, thanks for posting! 

• The “free market” isn’t propelled by what you “want” – it is fueled by what “works”. If one brings a wine like Castell’in Villa in (which I did 30 years ago in a small distrib) and no one buys it – that product is free to go away, maybe to come back again when it will work, when more people want it. And yes, I know conspiracy theorists want to blame the large “greedy” distributors for preventing this so called “free market”. As there is nary a scintilla of difference in economic metrics both small and large distribs are subject to (you buy – you sell – you hope to make and profit – and stay in business – and if that doesn’t work – you must close out the product – lose money and move on – you do it fewer times you stay in business you do it too many times you go out of business). I doubt any government in Texas, in any economic cycle, is going to bail out a liquor company because they made unsound economic decisions.   Mai, this monopoly you bemoan is simply an inaccurate perception. There is no “free license” (you do love the “free” word). It is a matter of whether or not something will sell well and continue to sell. Period. No one in their right mind would discontinue any product or not bring it in if it didn’t sell. Some products disappear from the marketplace because they didn’t sell or because the conditions just weren’t sustainable for a continued  and healthy economic life of the product. Edsels, Corvairs, Pintos, Yugos. They just didn’t work in the market in the time. And they were “free” to go away. Maybe to come back again. Or maybe never. And anyone is “free” to try and make it work. Again and again. And those same people, taking those risks, might succeed. And they might fail. But there is no bogeyman waiting in a dark corner, trying to prevent you (or anyone else) from getting what they want, in your “free market”. There may be a government regulation. And if you disagree with it you are “free” to go to Austin, plunk yourself down and work to change it. But if someone can’t sell it to you and do so in a manner in which they won’t lose money, then it just isn’t going to happen. Just because you, or anyone else wants their MTV, doesn’t mean it will be economically feasible and sustainable. And the folks who loved their Pintos and Edsels ( I had two Corvairs and four Fiats, so I know about these things) they either had to find a way to keep them running ( short of moving to Cuba) or find another means of transportation. Or wait for the market to allow them to resurface (as in the case of Fiat) when a newer crop of consumers came into being who are willing to spend their money on them. I for one do not think I will buy another Fiat, even though the new 500 is pretty darn cute!

• Actually I buy wine by the case. So that $10 is actually $120. And, I wouldn't buy wine online that I am not already familiar with. I travel quite extensively and have tasted wines from many regions. Many of my fondest memories involve wine, and when I have one in a faraway place that hits "home" with me, I will usually hand carry back to the states. When that stash is gone, and I want to buy more, and I can't find it in Texas, I go online.  I appreciate your advice, and absolutely I do support local. But one of the best things about being American is that we have a free market. And the argument can be made that the local prices should be on par with prices elsewhere in the country. When the prices are significantly different, I can only surmise that extra spread going to the middleman due to this Texas law. In any case, my point is it's not just about saving money. The bigger part of it is that I should be able to buy the wines I love when they are available elsewhere, but not in Texas, and when I buy the same bottle of wine in Texas that I can get in New Jersey or Florida, I should not have to pay a 50% markup. (my example above was paying $30 here for a bottle that costs $20 elsewhere in the country).

• No regulation is good regulation except in the case that it stomps on my competitors and puts more money in my pocket. In this case it appears Texas likes its' government big too.

• Jeremy et. al. I wanted to post my views here far any interested parties to read. I was able to pass the Master Sommelier exam and build two Wine Spectator Grand Award winning lists in Texas with only wines available in Texas. In fact many agree that the vast majority of wines considered Iconic are available here with just a few exceptions. These are not here as there is no demand. When the demand isn’t there it just simply isn’t there, more on this in a second. Within the category of these exceptions there are other classic/Iconic wines available here.   I would also like to point out that the “greedy distributors” have often obtained state label approval and brought in one case of an item I was interesting in putting on my list many times. Without these “greedy distributors” we would have access to far less wine than we have now. Could you imagine trying to run a wine program like the exciting and ever-changing lists that Sean Beck has by ordering directly from wineries and/or importers? Wow what an onerous task and a logistical nightmare!   Also, I would like to point out that ordering online and having an out of state retailer ship you wine can be quite costly and also only confounds the problem which you address above. If you will create a relationship with a real live person at a retail shop they can get you (almost) anything you want. Shoppy locally for wine also increases the chances of you getting your beloved Chianti as you thereby increase the local demand and then..well I guess I don’t need to lay out the obvious. At the end of the day wine is about relationships. That is why we wait until opportune moments to open “special” bottles of wine with friends and not by ourselves while reading blogs or looking at facebook. If you take time to establish relationships with retailers and sommeliers your view of the wine world will be expanded exponentially and you show how many wine lovers we have in Texas.   Enjoyed the follow up re:TABC. The winery permit is the most creative way for Wine.com to go it allows them complete flexibility. I say bravo to them as they have collapsed the three tier system to two thereby creating more margin for themselves. Unlike control states, in Texas a supplier can have more than one “distributor” so this opens up a world of possibility for them. Thanks for your time and dedication to our industry Jeremy your opinions and view are always engaging.

• Jeremy, great article. However, I am disturbed that you have a squeezy bottle of Great Value Buttermilk Ranch dressing on hand.

• But in response to Texas Attorney General letter of opinion request RQ-0805-GA, Administrator Steen stated, "the commission has allowed "bulk buys." "Bulk buys" is a process by which an individual or legal entity may purchase all the ownership interest in a legal entity holding a package store permit." Doesn the fact that the TABC has allowed multiple consolidations of liquor store chains, clearly go beyond the intent of the loophole created by 22.05 and go way beyond the original intent of the section.

• Would you really order a bottle of wine from an on-line and out-of-state retailer just to save $10?  You're taking the risk of breakage and (more likely) the wine getting cooked on a loading dock somewhere as it makes its way to your house... and what if it's a corked bottle - or what if you just don't like it?  You can't send it back like you could take it back to your local retailer if you'd purchased it here in town.  Go to a place like The Tasting Room, where they'll open just about anything and let you taste it before you buy it.  And, if you get home and find that a bottle is corked, you can bring it back and get it replaced.  Isn't that worth $10? (although they'll probably match the on-line price)  Isn't it better to support locally-owned businesses?

• "Big distributor" being the important distinction here...then again, if given the chance, I'm confident most of our smaller distribs would simply jump at the chance to become the newboss/sameastheoldboss.

• Tom, Section 22.05 says that two people who are closely related can consolidate multiple package stores. That's how Texas ends up with family-owned chains of liquor stores that seem to violate 22.04. Carolyn Beck Sec. 22.05. CONSOLIDATION OF PERMITS. If one person or two or more persons related within the first degree of consanguinity have a majority of the ownership in two or more legal entities holding package store permits, they may consolidate the package store businesses into a single legal entity. That single legal entity may then be issued permits for all the package stores, not­withstanding any other provision of this code. After the consolidation, none of the permits may be transferred to another county.

• Mai, I'm so with you! For us to lobby the Texas legislature, we'd have to go up against the big distributor and the big retailers (who have no interest in seeing the law change). But sometimes the most important battles to fight are those you know you won't win... a famous winemaker, Baldo Cappellano, said that... it's so true... 

• Have any of you seen TABC sec 22.04 that states that no person may hold more than 5 liquor store permits in Texas. 

• As a wine lover who loves to shop online, I can't tell you how frustrating it is to find a rare wine that you love available from a wine seller in another state, only to run into a roadblock during checkout because of Texas Law. I buy wine from local markets/shops. But if the local shops don't have the wine I want, I should be able to buy it elsewhere.  Texas distributors have basically been given a free license to operate a monopoly, all thanks to the TABC. And what does a monopoly do? It drives up prices. There are several wines I could buy out of state for $10 less a bottle than what I pay here. It's the consumer that ends up paying the middleman.   I wish more people knew about this and fought it. If someone wants to start a petition to lobby an end to this ridiculous TABC rule, I will sign!!!

• How do retailers of wine like Spec's fit into this whole thing, Jeremy?

• Great scoop Jeremy, following closely and looking forward to learning more on this tomorrow from you!

• I just spoke to the TABC (always super nice folks there) and I was right (Tom is incorrect): Wine.com will be able to buy from sources outside of Texas.  I'm going to do a follow up post tomorrow... 

• As I understand it, they HAVE to buy from Texas distributors. But... because they are a winery in Texas, they can be their own distributor. Tom may know more than I do here. But from how I understand the local law, as a distributor, they could technically buy wines from importers outside of Texas and be the Texas distributor for that wine. I don't have a lot of hope that Wine.com is going to change the availability of wines that other Americans can easily buy but we can't. What I do know is that the system is broken and that there are TOO many young wine professionals who are missing experience and contact with all kinds of wines because of anachronistic, gerrymandering lobbying. I love Texas and I am very proud to be a new Texan. But I am ashamed of this practice. 

• Jeremy, Crazy and fascinating story. Can you clarify if wine.com will only be selling wine it acquires from TX distributors? There seems to be some confusion as to whether an establishment with a winery permit in TX can act as a distributor thus providing whatever wines they want, or if they can only sell wine provided by other existing TX distributors.

• This addendum from Tom Wark (sent to me via email): But here's what needs to be understood. Wine.com is actually only able to sell and ship wines to Texans that it first purchased form a Texas wholesaler. That means that the Castell'in Villa Chianti Classico you mentioned can not be sold by Wine.com and shipped to a Texas consumer unless wine.com buys that wine from a Texas wholesaler. What's really interesting is that Wine.com set up a physical presence in Texas and got the wine producers license in stead of a retailers license. You know why? Because a few years ago, when SWRA was suing texas for discriminating against out of state retailers, the TX legislature passed a law that limited Texas retailers to only shipping wine into the county where the physical retail outlet was located. However, a Texas "WINERY" can ship ship throughout Texas.

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